OMB, OPM tell agencies to take different approach on employee bonuses

The Obama administration is trying a different tack on federal-employee bonuses and awards in fiscal 2014.

A new directive from the Office of Management and Budget and the Office of Personnel Management continues clear-cut spending caps on employee awards but won’t outright ban them — even if the across-the-board spending constraints, known as sequestration, continue.

“Given the current fiscal environment and the budget constraints agencies will operate under in FY 2014, it is critical that agencies’ use of performance awards be managed in a manner that is cost-effective and leads to increased employee performance and organizational results,” OMB Director Sylvia Burwell and former acting OPM Director Elaine Kaplan wrote in a Nov. 1 memo to the heads of federal agencies and departments.

The new guidance continues to cap rank-and-file employee bonuses at no more than 1 percent of those employees’ aggregate salaries. Senior Executive Service member bonuses are capped at no more than 5 percent of the aggregate salary levels, according to the guidance. These spending levels are consistent with caps first ordered by OPM in June 2011.

Overall, agency spending on employee awards is limited to fiscal 2012 levels, according to the new guidance. Both OPM and OMB will monitor data provided under regular reporting procedures to make sure agencies are complying with the new restrictions.

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Bonuses slashed under sequestration

Last winter as the administration prepared to implement the first round of across-the-board sequestration cuts, OMB directed agencies to cancel most discretionary bonuses unless they were required by law.

But the administration’s guidance appears to be taking a different approach to bonuses during sequestration for fiscal 2014.

If Congress fails to come up with a deal to replace the cuts and they remain in effect for the remainder of fiscal 2014, rather than a blanket ban on bonuses, agencies are directed to reduce their planned spending on SES and non-SES bonuses by an amount proportional to the overall agencywide cuts required under sequestration.

The directive also leaves some wiggle room for bonuses dictated by union agreements, telling agency heads to honor all collective bargaining obligations prior to implementing the new caps on employee awards.

Federal employee performance awards came under fire earlier this year from both congressional overseers, who were outraged at the costs of bonuses, and federal-employee groups, who were dismayed at agencies’ efforts to cancel them.

Citing budget cuts the Internal Revenue Service canceled manager bonuses and sought to end union employee bonuses this summer, a move disputed by the National Treasury Employees Union, which argued the bonuses were required under their collective bargaining agreement with the agency.

Meanwhile, the White House announced in June it was suspending cash bonuses under the Presidential Rank Awards. The awards, which are not part of the annual performance-awards process, recognized outstanding SES members with bonuses of between 20 and 35 percent of their base salaries.